Stellantis warns UK: renegotiate Brexit or lose your electric car factories

More than three years ago, the United Kingdom left the European Union in an event known as Brexit . Since then, the repercussions of this decision have been felt in all areas, including the automotive sector.

One recent consequence concerns Stellantis , an automotive company with two factories in the UK, located in Ellesmere Port and Luton. The car giant, led by Carlos Tavares , has called on the UK government to renegotiate the Brexit deal to ensure its production in England is profitable. Otherwise, Stellantis could stop manufacturing electric cars locally.

Stellantis could lead other manufacturers

The Brexit decision had a significant impact on the British automotive industry, being a major setback. Even before the exit of the United Kingdom from the European Union, this decision taken by a majority of the British during a referendum had repercussions on the automotive sector.

Concrete examples include the closure of Honda's Swindon and Ford's Bridgend factories, which led to a 14% drop in car production in the UK in 2019. However, the Trade and Cooperation Agreement post-Brexit between the European Union and the United Kingdom has helped to stabilize the situation.

This agreement provides for exemption from customs duties and quotas for all goods complying with the rules of origin in accordance, in particular the rule of origin which particularly supplied the electric car.

Had Brexit been stricter, more manufacturers would likely have stopped production in the UK, as was made clear by Stellantis at the time. However, thanks to the rule of origin, cars made with at least 40% local materials were exempt from customs duties.

The percentage evaluated as follows: it will increase to 45% next year, then gradually increase to reach 55% in 2027. At the time, manufacturers such as Stellantis accepted this rule of origin and decided to maintain part of their electric car production in the UK.

However, since then, many changes have occurred, including a significant increase in the cost of raw materials across the world. Additionally, with the transition to electrification of the automotive sector, Europe and the UK are looking to supply their own electric car battery factories. However, this takes time, and in the meantime, local manufacturers still depend on Asian batteries.

This poses a disadvantage mentioned when it comes to respecting the rule of origin of the trade and cooperation agreement previously. In addition, rising raw material prices, largely driven by the war in Ukraine, have led to an explosion in the cost of these batteries.

As a result, the profitability of electric vehicle manufacturing has declined compared to two years ago, when Stellantis announced a £100million investment in the Ellesmere plant to produce zero-emission cars.

In addition, in the UK, they still face supply problems and shortage of manpower, especially truckers, which leads to increased transport costs. In short, since the signing of the Brexit agreement, everything has turned against them.

In addition, due to rising transport and raw material costs, the use of local raw materials becomes more complicated, making it difficult to meet the percentages required by the rule of origin. If manufacturers violate this rule, they must pay customs duties equivalent to 10% of the value of the vehicle they produce.

Carlos Tavares is the head of the Stellantis group

Stellantis is questioning the profitability of producing some of its electric vehicles in the UK, whether through its local brand, Vauxhall, or other group companies such as Peugeot and Fiat. As a result, the group views its role as a producer in the country in a simplified way. Stellantis made this concern clear to the UK government through a letter to the UK Parliamentary Business Committee.

In the brief submitted to the House of Commons, Stellantis says: "If the costs of manufacturing electric vehicles in the UK become uncompetitive and unsustainable, factories will be forced to close."

Closing UK factories would result in the redundancy of 1,000 people at the Ellesmere factory and 1,200 people at the Luton factory, in addition to many other individuals who indirectly depend on these factories, representing a total of about 5,000 people affected.

However, Stellantis has yet to make a final decision. In the same statement, the company proposes a solution to this problem which could also encourage other manufacturers to make similar decisions for their vehicle production plants in the United Kingdom.

Stellantis stresses that the UK needs to review its trade deals with Europe. The company calls for a renegotiation of the rules of the game in order to maintain the profitability of the production of electric cars in the country.